Tales and Opinion from the Front End of Credit Broking

Tag Archives: secured loans

This morning three conversations have made me think of the endless optimism and faith in divine intervention.

All three have gone much like this conversation which typified the issue:

Me: “Hello I’m calling because I am in your area next week and wondered if I could visit to discuss secured loans with April the 1st in mind”

Broker: “why?”

Me: “Well if you write mortgages then secured loans will have to become a feature of your decision making from April the 1st with FCA taking over regulation of the product. Even if you don’t use secured loans, you will need to demonstrate they have been considered”

Broker ” Not interested mate, I’ve never done a secured loan, and I have no plans to do so. Click”.

Oh the “click” was the sound of the phone hanging up, not some sort of maniac verbal idiosyncrasy that one might as a suffix to a sentence definable by its ignorance and insanity. A click that signified “rebuttal not welcome”.

Insanity aside, practices taking this view are surely incubating an egg that will hatch into a nightmare legacy.

FCA “So you re-mortgaged your client to a higher rate and they paid a 6% exit penalty? Why?”

Broker “They wanted a further £50,000 and their current lender would not agree to a further advance”

FCA “Did you consider a secured loan?”

Is this the moment a broker’s professional life flashes before his or her eyes? A slow motion car crash moment as the words formulate from a mouth that had previously rebuked a hundred loan packagers, those words that had condemned a hundred conversations to be ended by an abrupt “click”, those words that will now condemn and confound their predicament “I don’t do secured loans”.

The “oh god” moment, the family fortunes negative buzzer moment, a hundred conversations flashing through his mind, “I can help you with secured loans” click “We do secured loans” click “have you thought about secured..” click “Secured…” click “hey honey let’s have sec…”click.

CLICK. CLICK CLICK.

It reminds me of an old joke where a devout christian ends up capsized on his boat in the middle of an ocean. After an hour a lifeboat shows up, “don’t worry he says” rejecting the assistance “my god will save me”. Two hours later a cruise ship passes by, “don’t worry, my god will save me”, four more hours a trawler “don’t worry, my god will save me.”

6 hours later, the devout christian is drowned, his first words to St Peter are “why didn’t you save me? I go to church every sunday, where were you?”

To which St Peter replies: “We sent you a bloody lifeboat, a cruise ship and a trawler, what more do you flaming well want?”

Therein is the crux of the matter, when brokers inevitably fall foul of FCA compliance for not looking to secured loans, will they be saying; “Where was my help with the product” or “nobody helped me”?

No not Christmas… REGULATION, and the FCA’s naughty list is a far worse place to be than Santa’s little Black Book.

The soon to arrive FCA Regulation of the secured loan marketplace is long overdue and should be welcomed by enlightened stakeholders with open arms, yet to some the spectre of regulation is making the cracks all too apparent.

Personally I don’t see the big deal, my ethos is to show up to the office, call FCA regulated firms offering my services, provide an excellent, compliant service to their customers and my intermediaries alike, then pay them what I have promised to pay them.

Those that do not engage in the secured loan marketplace, don’t because they have made an educated decision based on the level of training they have endured and do so based on current regulatory frameworks. If an IFA deems a packagers product portfolio to be inferior to his mortgage offering, we can present the advantages of the secured loan, even question his wisdom at electing to mortgage a client, but surely, until we are regulated and qualified to the level of the IFA it is not our place to castigate them.

Regulation will not change that, regulation won’t change what I do one little bit, and regulation will not change what that IFA does either.

Yet in what appears to be a display of panic, some contemporaries seem to think that they can wag the dog, that they can preach to those who have known nothing other than regulation by the FSA/FCA, be derogatory about the very mouths that feed the industry.

Will a network embrace my service if I castigate it and its members? Unlikely

Will I change the minds of those who do not currently look to secured loans as an alternative by attacking them from my pulpit of ignorance? Unlikely

Over time, will those individuals engage with us because we demonstrate the ethics, service and knowledge that they demand? Absolutely

Regulation will change nothing in terms of business flows, those that use a preferred secured loan provider will continue to do so, those that don’t will need convincing that we aren’t all trying to teach them to suck lemons.

What regulation will change is the working practices of firms that are presently not compliant, it will uncover previously undisclosed bad practice, and it will extract rogue firms from the marketplace; perhaps that is reason enough for some to panic!

In the second decade of the 21st century, the machines rose to take over the Earth.

No, not the beginning of a post apocalyptic dystopian nightmare, like “The Terminator”, more the dystopian nightmare that is the secured loans packager scene these days.

Increasingly packagers are relying on, and promoting the use of automated quoting engines, personalized and flash marketed as tools that empower the intermediary to decide the destiny of a loan applicant from the comfort of their own office, or indeed from the armchair of their clients’ living room!

Undeniably these engines are feats of IT engineering and add kudos to a brand as the bragging rights of who has “the most powerful tool” are sought.

I can’t help thinking that automation is not an advancement within our industry more a hobbling of the professional standards intermediaries around the UK demand.

A simple question; why would you choose to spend ten minutes punching details into a machine for it to spit out an answer that needs human verification, when you can pick the phone up to a trained underwriter who will take a maximum of 3 minutes to tell you if a deal can be done?

When did we wake up and elect that automation was a preferred choice?

“God I absolutely love the series of multiple choices I have to make for 15 minutes when I call BT only to be put on hold and made to listen to James Blunt warbling for 35 minutes before I can speak to a person. This is by far the best way of doing things” Said nobody…ever!

Here is another question; what impression does it give a client to see you interfacing with a machine as apposed to the warmth of dealing with a trusted colleague at the end of a line?

The quoting engine won’t be on the end of the phone for your client at 8pm to discuss concerns they have about fees/rates/how quickly that all important consolidation loan will complete!

Finally, who is getting the best out of the relationship between intermediary and packager? Bearing in mind that the intermediary, supplies a sourcing system with their contact data (data with intrinsic value) and then, in order to generate a quote, supplies the the sourcing system with their clients’ data (data with intrinsic value). What they get in return is the best guess an algorithm can provide, without a credit and land registry search.

Ladies and gentleman, I give you the first calculator that in order to provide a solution, takes in data, licks the end of its’ mechanical digit, hoists digit into the air…and… guesses.

It is to be borne in mind, that the average intermediary will at the very least be CeMap qualified following a course of education and testing. The average secured loan underwriters’ only qualification is experience. How much experience, lessons learned from underwriting a loan from start to finish are underwriters who sit behind a quoting system garnering?

There was no great science behind underwriting, just good product knowledge underpinned by a strong desire to help introducers and clients. Relationships forged from that very first conversation about a deal.

Recently I met with the sales director of one of the leading secured loan lenders int he UK, he in an off the cuff remark said words to the effect of “most of the secured loans underwritten don’t fit criteria, they all have their little idiosyncrasies.”

Automation relies on criteria, algorithms do not like idiosyncrasies, rendering them unfit for purpose.

As an intermediary, ask yourself the question; apart from the flashy graphics, what does a secured loan sourcing system really add to my business?

Probably an odd title to broach a subject on my mind. So how are mortgage market practices reflective of those within Victorian surgeons? I hear you ask.

In 1842 Sir Robert Liston, the most pre-eminent surgeon of the age was timed amputating the leg of a patient; the time recorded? A mere 30 seconds.

30 seconds, a blink of an eye within a lifetime, no time to think of alternative treatments, no time for the poor (and conscious) patient to back out and make a judgement call, and no consideration period where the poor patient may have come to the conclusion that waiting for 86 years for Penicillin to be unearthed, may be the preferable option.

How did he get so good? How did Sir Robert Liston become so very proficient at sawing off an adult leg in less than a minute? Well he used to do it all the time, it was his “go to” treatment.

“Got a bunion? … Amputation is the answer”

“What’s that a verrucca??? Ooooh nasty… yes I shall have to remove your leg at the hip”

“Sprained ankle sir…” You get my drift

It would be lax for me to suggest that Sir Robert was a bloodthirsty fiend carelessly hacking off limbs, when a sticky plaster and a “wait and see” approach would have sufficed.

I think it is a fair assumption that Sir Robert thought he was doing good for his patients, ridding them of toxic infections by totally removing the problem, and through habit, becoming the very best at hacking off limbs.

Fast forward to today, and let’s not pretend what we do is leg surgery, but all too often the habitual approach within the mortgage market is embraced without a thought for an alternative “stick plaster wait and see” option. I speak to dozens of brokers each week who pronounce “I have no need for secured loans, I am able to remortgage all of my customers”.

Whilst I don’t doubt the mortgage brokers’ proficiency at performing remortgages, and I don’t doubt that for those mortgage brokers who power through a remortgage in record time their heart is firmly in the right place, surely it is worth considering the alternatives?

“Why remortgage a client looking for a further advance who is on a rock bottom SVR on their principle mortgage? Why not top it up with a second charge before waiting for interest rates to rise and fix a remortgage on that event?”

If the answer is “I will always remortgage” perhaps, just PERHAPS there are some legs being hacked that merely need an elastoplast.